Fed Funds Rate – What is it?
July 26th, 2007 by John Thomas
Fed Funds Rate
The Fed Funds Rate is the interest rate that Banks and other depository institutions charge each other when they lend money to each other, usually on an overnight basis. Federal law requires banks to keep a certain percentage of their customer’s money on “reserve” or right at hand, where the banks earn no interest on it. Consequently, banks try to stay as close to the reserve limit as possible without going under it, lending money back and forth to each other in order to maintain the proper reserve level. Similar to the Federal Discount Rate, the Federal Funds Rate is used to control the supply of available money and hence, inflation and other interest rates. Raising this rate makes it more expensive to borrow and lowers the supply of available money, which increases short-term interest rates and helps keep inflation in check. Lowering the rate has the opposite effect, bringing short-term interest rates down.
Summary:
Knowing the facts about the Fed Funds rate and Discount rate are important to being fiscally literate.
Knowing the facts about the Fed Funds rate and Discount rate are important to being fiscally literate.
These indexes are not available for lending on consumer ARMs, but influence what the Prime Lending Rate will be.
If you would like to apply for a Delaware Home Loan, you can APPLY ONLINE HERE, you can call John R. Thomas at 302-703-0727 or send an e-mail to jthomas@primeres.com
John R. Thomas – Certified Mortgage Planner – Primary Residential Mortgage, Inc.
302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office
42 Reads Way, New Castle, DE 19720
I am a Delaware native who has been actively involved in the Mortgage and Finanace industries for over 10 years. Call me at 302-703-0727
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